Inclusive Growth

Making Job Training Programs Work Better for Laid-Off Workers

As speculation grows about massive job loss due to trends in trade and technology, today’s training programs offer real lessons for a better future.

Making Job Training Programs Work Better for Laid-Off Workers

March 16, 2016

Speculation on large-scale job loss due to economic shifts from trade to technology looms over a US presidential election year. The Trans Pacific Trade Agreement signed by 12 nations last month has been called the largest trade deal of all time and is a crucial part of President Obama’s foreign policy legacy; however, its effect on US jobs has sharply divided economists, with proponents arguing for a mild net gain as the total composition of US employment shifts toward better-paying, export-driven jobs, and opponents estimating nearly half a million net jobs lost due to the deal. These debates come only weeks after the publication of The Future of Jobs report by the World Economic Forum, which, with its prediction of 5 million jobs lost globally by 2020, put the adverse effects of technological disruption on the radar of decision-makers the world over.

Even if, as Harvard University economist Dani Rodrik concluded in his review of the modeling of the Trans Pacific Trade Agreement, it’s too early to see such projections as definitive, they raise important questions for the future of inclusive growth in the US. What do workers need to transition and thrive in the face of such disruptions—and what resources are in place to deliver on that need?

In the US, support systems are currently designed to help those experiencing job loss due to trade disruption, rather than to technological displacement of the kind highlighted by the World Economic Forum report. Of these, the most well-known system is the Trade Adjustment Assistance (TAA) program, which provides benefits such as extended unemployment benefits, training programs, relocation assistance and subsidized health insurance.

Since TAA’s inception in 1974, 4.9 million workers have been determined to be eligible for its benefits and services; as of December 2014, 2.2m workers had opted in to the program. Looking at TAA offers important real-world lessons on the challenges workers face—especially, course-change for older workers and the gap between training and the jobs pipeline. Taken together with more recent analyses of tech-related displacement, these lessons can provide a starting point for re-envisioning training and assistance in the US.

In 2012, Social Policy Research (SPR) and Mathematica concluded that TAA had a net benefit of negative $26,837 per participant. It’s easy to draw quick conclusions about this number, but reading the report’s analysis of the “why” opens new ways of thinking about solutions. As the report notes, much of that negative is attributable to  the lower salaries that workers, when they do find new employment, often must accept. In part, this is because many of the workers are older and well-established within the trajectories of their careers—and that means relatively high wages and skills specific to their old jobs that are difficult to match when transitioning to a new career altogether. Nonetheless, at least half of those eligible for TAA enroll in a training program designed to help them find a new career path.

A challenge they face: Is there a pipeline of jobs in the industries they’re training for after completing the program?  TAA participants presently work with a case manager to create a road map for reemployment and spend 564 days, on average, in training. SPR and Mathematica’s 2012 report tracked and compared participants with non-TAA-eligible unemployed workers over a four-year period. By the fourth year, only 37% of TAA participants who received occupational skills training were employed in the occupations for which they had been trained.

“I don’t know if there’s any rhyme or reason to what people are choosing to train in,” says Kara Reynolds, economics professor at American University whose 2008 report also concluded that although TAA training helps displaced workers find new employment, it’s at lower wages.

The way forward to success? A tighter connection between local labor markets and employers and a broader view of benefits and beneficiaries

“Ideally you would want firms in your region to participate in what workers they’re looking for and recommend the type of training they should be doing,” says Reynolds.

In addition to a close coordination between local labor markets and employers, training programs need to offer apprenticeships so there’s book and on-the-job learning, says Gary Hufbauer, senior fellow at the Peterson Institute for International Economics.

Of the 32,453 individuals who entered a TAA-certified training program in 2014, 470 were listed as on the job and 9 were enrolled in an apprenticeship. (Some 45%, or 28,371, signed up for occupational training.) “It’s a daunting thing for an individual to have to figure out what skills are required in a particular area,” says Jacob Kirkegaard, another senior fellow at the Peterson Institute. “You rely on luck or for-profit colleges instead of a systematized and collaborative process on what skills are required in a particular area.”

The importance of a systematized, collaborative process of skill-to-job matching is a crucial lesson garnered from the TAA studies, and it’s significance doesn’t just apply to job displacements due to trade.  A key takeaway of our conversation, with the authors of the World Economic Forum report is that a more proactive effort by businesses to “upskill” workers could do much to prevent a future of widespread joblessness as the result of technological disruption.

Beyond tighter coordination between job-seekers and employers, what else might feature in a vision of worker assistance for a future where disruption can come from trade or technology?  Robert Lawrence, professor of international trade and investment at Harvard and a Center senior fellow, argues for a new approach in assisting the unemployed: a broader safety net that assists workers in transition regardless of the reason for their job move—trade-related displacement or not. In a 2008 whitepaper, Lawrence posited replacing TAA with an “Adjustment Assistance Program” (AAP) that would combine the best elements of unemployment insurance, TAA and training programs in the Workforce Investment Act (WIA). Among other things, the one-stop package would include a wage-loss insurance program for workers over 45 years of age to supplement their income when they take employment at a lower-paying job and continued health insurance coverage. It would also allow workers in transition to supplement their unemployment benefits by withdrawing savings from retirement accounts without penalty. The program would be paid for by a flat tax of 1.32% on all wages, with an estimated annual cost of $22bn. “Trying to do trade adjustments on the cheap are good for some workers, but not very effective,” says Lawrence. “We should improve the training programs, not get rid of them.”

Featured Image Credit: Former steelworkers in the UK attend a job fair. (Photo by Ian Forsyth/Getty Images)